Sep 11, 2012

Uncle Sam to corporate insiders: You could make a lot more money exposing
fraud than participating in it.

The Internal Revenue Service has issued a $104 million reward
to Bradley Birkenfeld, the former UBS banker who blew the whistle on the Swiss
bank’s far-reaching efforts to help Americans hide money from the tax
collector, Birkenfeld’s lawyers said Tuesday.

Stephen Kohn, one of Birkenfeld’s lawyers, said the IRS has
sent a message to every American taxpayer who still has an illegal offshore
account:

“Turn yourself in before your banker does.”

Kohn said the IRS also sent “104 million messages” to
employees around the world: “There is an effective way to blow the whistle . .
. and we are paying awards.”

Birkenfeld’s bounty is likely to give would-be tax dodgers
pause before they place their faith in offshore bankers. It also calls
attention to the fact that whistleblowers can profit from alerting federal
authorities to a wide variety of frauds, from Wall Street to defense contracting. The Securities and Exchange Commission
recently announced that it paid its first whistleblower reward under a law
enacted in response to the financial crisis -- a bounty of almost $50,000, or
30 percent of the money the SEC collected in an enforcement action based on the
tip.

But while Birkenfeld’s legal team celebrated with a
Washington news conference, they noted that the government had also punished him.

In 2009, Birkenfeld was sentenced to 40 months in prison for
helping one of his wealthy American clients evade taxes of $7.2 million. With credit for good behavior, he was recently
released from prison but remains under restrictions and was unable to attend
the news conference.

Instead, his brother, Douglas Birkenfeld, spoke for him,
explaining that he wasn’t quoting Bradley directly but rather was expressing
what he knew to be Bradley’s sentiments.

“I single-handedly transformed centuries of illicit Swiss
banking practices, but I paid a huge price for being the only person to have
the courage to come forward,” Douglas Birkenfeld said in the statement. “I knew
that blowing the whistle would end my career in Switzerland, but I did not
expect that I would be risking my very freedom in my home country.”

Birkenfeld had to wait years for his reward; it had been
unclear whether he would even receive
any award for blowing the whistle given his participation in the tax
scheme. It required a cultural shift for
the IRS to get comfortable with rewarding a participant, said Dean Zerbe, a
former U.S. Senate staffer who worked on the IRS whistleblower law and served
on Birkenfeld’s legal team.

“The IRS, to their credit, recognized that if they want to
get good insider information…you can’t be cutting back someone’s award” because
they participated in the fraud, Zerbe said.

“You don’t have Mother Teresa and the Boy Scouts” carrying
out such schemes, Zerbe said.

Even though Birkenfeld received his award, Zerbe said that
whistleblowing is still not “a walk in the park” but rather “a step into the
void.”

The IRS can award whistleblowers between 15 and 30 percent
of what the government collects from tax frauds.

It isn’t clear how much money the IRS credits Birkenfeld
with helping it collect or what percentage of that the agency awarded him.
Those numbers were blacked out in an
IRS document released by his lawyers.

Birkenfeld’s award was connected to a $780 million settlement
that UBS reached with the U.S. government in 2009, but $200 million of that was
related to charges by the SEC, not the IRS.

Birkenfeld’s lawyers say his disclosures also helped the IRS
collect more than $5 billion in back taxes, fines and penalties, and forced UBS
to release the names of nearly 5,000 U.S. taxpayers who held illegal offshore
accounts with the bank.

Birkenfeld provided “exceptional cooperation” and
“comprehensive information” that was “exceptional in both its breadth and
depth,” according to an IRS
report made public by Birkenfeld’s lawyers.

“The IRS believes that the whistleblower statute provides a
valuable tool to combat tax non-compliance, and this award reflects our commitment
to the law,” said IRS spokesperson Michelle Eldridge.

A spokesperson for UBS was not immediately available for
comment. A spokesperson for the Justice Department referred Project On
Government Oversight to the IRS.

The IRS has been
criticized for its handling of whistleblower tips and award claims.
“Unfortunately it has taken the IRS nearly four years to settle this
whistleblower case,” said
Sen. Charles E. Grassley (R-Iowa), ranking member of the Senate Judiciary
Committee and author of the IRS whistleblower law.

“If the IRS is serious about encouraging future
whistleblowers, it needs to continue to honor the spirit and intent of the law
and issue awards in a timely manner,” he added.

The IRS has committed to handling whistleblower submissions
in a more timely fashion, according to a June memorandum by a top agency
official.

Michael Smallberg is
an investigator with the Project On Government Oversight.

Comments

I want the names of the people that had the illegal bank account. they are all criminals , and need to be exposed. Under the freedom of information act the names should be made available. I'm sure we would all be interested in the names.

I think in this case it worked out in their favor. However, some people aren't that lucky. I was doing research and I came across a company who owed millions in back taxes and someone in the company exposed them, since the company had more than enough to pay the taxes back. However, the person who exposed them was fired and had other terrible things done to them.

I reported General Electric corruption, fraud and bribery in India, I was fired, my life systematically destroyed, I was drugged and poisoned, all sources of help were approached and turned against me, my corruption and right to life petition is in the Delhi High court and has not been heard for 6 months. I have been rendered homeless and almost destitute. GE tells the court not to grant me shelter on my shelter application. Attempts are being made to smear me as suffering from mental health issues and as an alcoholic. Please read http://seemasapra.wordpress.com/ and http://gewhistleblower.wordpress.com/ The matter is Seema Sapra vs General Electric Co. and Others in the Delhi High Court - Civil Writ Petition No. 1280 of 2012.

Copies of documents and pleadings filed in Civil Writ Petition No. 1280 of 2012 in the Delhi High Court can be read/ downloaded at http://seemasapra.wordpress.com/2012/09/10/copies-of-court-pleadings-and-documents-in-seema-sapra-versus-general-electric-co-and-others-civil-writ-petition-1280-of-2012-in-the-delhi-high-court/

The corruption involves GE Transportation bids to grab lucrative locomotive factory projects in India on public land, with public funds and with assured long term orders backed by government guarantees.